Q: I'm thinking about putting together a company budget for 2010, but I don't know where to start. Any advice?

A: Don't sweat it. If you can manage your household expenses, you can put together a budget for your company, too. All it takes is a spreadsheet, a couple of hours of uninterrupted thinking time, and a good grasp of your company's income and expenses.

David Drucker, a virtual CFO who works with entrepreneurs and emerging businesses at The A Team Executive Management in New York City, suggests taking the following five steps to prepare a budget that will help you manage your expenses and take your company to the next level of growth and profitability:

1. Be strategic. Align your budget with your company's operating strategy for 2010. The strategy should be an extension of your business plan and should clearly define your goals and objectives. This will force you to think about what is realistic in terms of sales goals and operating costs.
    
2. Forecast your sales. Together with your partner or sales reps, prepare a monthly sales forecast based on conservative assumptions. Break down your forecast by customer, sales rep and product line. You'll be surprised by how quickly your sales forecast will begin to take shape.
    
3. Analyze your costs of goods. Now that you've estimated your sales, you need to figure out how much it's going to cost you to make and deliver the products and services you're selling. This "cost of goods sold" is generally composed of labor, materials and shipping costs. Once you've figured out what your COGS will be, subtract it from your revenue projection to calculate your gross profit--that is, the amount of profit that's available to cover operating expenses such as rent, utilities and insurance. This will help you figure out how profitable a certain customer or product line will be--and to drop that customer or product line if necessary.
    
4. Calculate your operating expenses. Now that you know your COGS, it's time to figure out what your rent, payroll, marketing and other expenses are likely to be. Unlike COGS, operating expenses are the day-to-day costs you would incur whether your company rang up $100 worth of sales in a month or $1 million. Now subtract your operating expenses from your gross profit to calculate your EBITDA (earnings before interest, taxes, depreciation and amortization). Not only will this help you figure out how much debt you can afford to take on, but it will also help you determine your return on investment on the various sales and marketing strategies you decide to pursue.
    
5. Project your cash flow. Now that you've done the math, you can project your company's annual cash flow. This is especially important if you're planning to take on debt to grow your business or if you plan to make capital improvements to real estate or equipment you own. It's especially crucial if you have a seasonal business and need to cover cash-flow gaps in the off season. Says Drucker, "Getting a better grip on your cash flow during your company's startup phase will improve your likelihood of success later on."